Mobinil CEO says industry to face price hikes

Mobile phone services are going to get more expensive, and soon, Mobinil's Chief Operating Officer told a group of reporters on Monday.

“In the last years the traffic has increased, and we have had to increase operational expenses,” Yves Gauthier explained.

Gauthier said the company is working on introducing new 4G infrastructure to Egypt, in addition to making other investments that would increase its costs. He estimated that the company would garner LE2 billion worth of investments in the 2013 fiscal year.

“We are in an industry where we need to invest, to prepare the way for new technology,” he asserted.

The pound's recent devaluation has put further pressure on the company to raise prices, Gauthier claimed.

“With the exchange rate of the pound, if you are not able to increase revenue, you cannot provide the same services,” he said.  “At a certain moment, you have to increase your revenue.”

Gauthier and other Mobinil officials said that the rumored price hike, which was first enacted by mobile operator Vodafone, was merely the company’s decision to pass the existing 15 percent sales tax on to consumers.

Mobinil has not made a move to increase prices yet, but this is becoming an inevitability given the current economy, they said. Gauthier added that if the International Monetary Fund-mandated tax reforms put on hold by President Mohamed Morsy in December are finally put into action, the company would have no choice but to pass the higher taxes on to its customers.

 “We can no longer keep absorbing the shocks to the market here,” he said.

Mobinil is owned by majority shareholders Orange, a French Telecom company, and Orascom Telecom Holding, a division of the Egyptian-owned Orascom Holding. Mobinil’s market share in Egypt is estimated at 34 percent.

The Communications and Information Technology Ministry first announced it was considering increasing the 15 percent sales tax on mobile phone users in October. Then, Minister of Communications and Information Technology Hany Mahmoud did not say by how much.

Also in October, the Consumer Protection Agency filed a complaint to the Egyptian Competition Authority (ECA) against the country’s three major cell phone operators.

The agency began investigations into whether Vodafone, Etisalat Egypt and Mobinil had a secret agreement to increase the prices for prepaid mobile credit cards.

ECA head Atef Yacoub said then he received several complaints alleging that since January 2012, the three companies have been cutting 51 piasters a month from customer credit via a “stamp tax,” although such a tax was not stipulated in the contracts the customers had signed.

But in January, the government denied a link between the higher prices of prepaid mobile phone cards and any new tax measures.

The National Telecommunication Regulation Authority said on 21 January that the recent increase in the prices of some prepaid cards was not a result of new taxes adopted by the government, and said that people should not pay more than the official rates set by telecom companies.

The Egypt Tax Authority also issued a statement saying that there were no new sales taxes on mobile phone services, and that the only increase was an existing 15 percent tax of the value of the balance card or the monthly voucher.

In the statement, ETA head Mamdouh Omar also said that the decision of the three mobile phone operators to increase their prices is "an internal affair and has nothing to do with taxation."

Rana Abbadi, a vice president at Mobinil, told Egypt Independent that in the company's conversations with the government, Mobinil had discouraged placing further taxes on the industry.

“The timing is not right,” she said.

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